Technology stocks are the stocks of the companies that undertake research, development, and distribution of technological products and services. It includes stocks of semiconductor companies, software manufacturers, microchip companies, social media platforms, and more. The technology sector and tech stocks have been massive earnings generators for ages, and continue to do so.
However, the future of tech stocks can be considered to be a bit blurry at the moment. Analysts have indicated that tech stocks are highly overvalued and may be entering a massive bubble. Investors are rapidly investing in tech stocks, while the returns have started declining. Therefore, it is highly probable that the bubble might crash soon and lead to a sudden market downturn.
Factors to Consider Before Investing in Tech Stocks
Investors must be careful while investing in tech stocks. They have generated high earnings and income growth in the past; however, at the same time, they have also proved to be highly risky and caused major losses.
The most significant factor to consider is that tech stocks have a high beta. In bullish times, they outperform the stock indices rampantly, while they become highly volatile in the bearish scenarios. Thus, the risks of investing in tech stocks are equally high as the rewards.
It is also essential to keep in mind that the valuations of tech companies have experienced an unprecedented rise in the past couple of years. It indicates the overvaluation of tech stocks and the possibility of the formation of a destructive bubble.
Which Tech Stocks Should I Buy?
We have aggregated a list of tech stocks for you to choose from. The investment must be made considering the time horizon, risk appetite, and the performance of the specific companies.
Tech stocks have always proven to be excellent avenues for high returns on investment, yet the volatility and risk involved cannot be ignored. Some tech companies and their stocks turn out to be too new with unproven technologies and fail to survive competition, while others may be too old to satisfy the ever-evolving needs of consumers.
Therefore, investors must understand the relevance and survivability of a technology company before investing in its stock. The rapid dynamics of the technology sector and value creation must be followed to make the right selection.
The Best Stocks for 2020
Our team has analyzed thousands of stocks in hundreds of sectors. Looking for stocks with massive growth potential? Check out our top stock picks for 2020.